Friends,

The peak time for Chennai Real estate in chennai is over.

If chennai RE is at peak anyone can sell their property in no time.
In 2007 everyone was running after land. It was like getting 'sundal' at vinayagar temple.
Banks also gave loan like giving 'sundal' at temples. Now banks are not able to get back the loan amount.
They dont know for sure the amount of non performing loans.
Banks are in denial mode in giving loans. Not only that. people also are not in loan buying mood.
They have lost their confidence about repaying the loans.
Those who have accumulated black money dont want to invest in 'non performing' properties.
Because of various reasons like these, peak time for Real estate in chennai is over.

Everywhere owners are telling rate at their will. Its like telling "Ayiram... rendayiram... naalayiram....".
Those who realised the facts are gradually reducing the price. But in most of the cases, plots are lying unsold.

If one is willing to sell a plot, and if there are many buyers we can say there is demand.
If there is demand from many sides, there will be price escalation.
But no demand... No increment in price. But rebate sale has started without buyers.
thanks
chataara

chataara
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  • Sorry abk, its not us who are clever :)

    Originally Posted by abk
    when satyam fiasco came you were shouting 55000 jobs lost and the consequential job losses and RE will fall .

    I AM NOT SAYING RE WILL GROW OR THERE WILL BE NO CORRECTION BUT CRASH IN CHENNAI WILL NOT HAPPEN(CLEVER YOU GUYS HAVE TAKEN A 15 MONTHS (LAG) BUFFER) SORRY CAPS KEY LOCKED



    Even Nats and I are in agreement about the lag! :D So, it is just an empirical observation (with sound logic) that RE lags between Stocks. Its not that we are extra-clever (thanks for the compliment :D).

    This 55000 jobs is not very relevant. The real losses will be in the millions. And the IT sector will see from 300000 to 500000 jobs before this is finished - calculations were provided for this.

    It is this and a prolonged recovery which will beat down prices. You must have patience as this will take a few years! :)

    cheers
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  • Originally Posted by abk
    when satyam fiasco came you were shouting 55000 jobs lost and the consequential job losses and RE will fall .
    against that this is a huge relief and growth that 55000 people did not lose jobs can be thougth as 55000 jobs created if satyam had failed.
    and now you are jumping on 'no new recruitment'.
    This has proved you absolutely wrong where are the 55000 jobs lost in satyam.many here were doing the same.
    ATLEAST ONE THING YOU AND CO. PREDICTED HAS NOT HAPPENED YET
    SATYAM HAS NOT FIRED 55000 PEOPLE AND THE 3 DEPENDENT JOBS I.E 150000 JOBS ARE STILL NOT LOST.

    I AM NOT SAYING RE WILL GROW OR THERE WILL BE NO CORRECTION BUT CRASH IN CHENNAI WILL NOT HAPPEN(CLEVER YOU GUYS HAVE TAKEN A 15 MONTHS (LAG) BUFFER) SORRY CAPS KEY LOCKED

    Abk,
    Can you tell me few reasons why chennai RE will not fall.When entire world enjoyed easy credit flow till 2008 Chennai RE went up more than 300% and now when massive credit deleveraging is happening across the world with assets collapsing across world and India Chennai will escape?.Is chennai located in Mars!
    CommentQuote
  • Further beating to RE by Infosys

    Source: Economic Times

    Infy defers hiring plans for engg grads by 6 mths
    25 Mar 2009, 0430 hrs IST, Chiranjoy Sen, ET Bureau


    BANGALORE: India’s second-biggest exporter, Infosys Technologies, has postponed its hiring plans for engineering graduates this year by

    almost six months, as the company seeks to cope with a lower demand for services in its top markets of US and Europe.

    Next fiscal, Infosys will be interviewing potential employees by visiting top engineering colleges during eighth semester, and not sixth semester as before.

    “Earlier, we used to give offers an year in advance, even one-and-half years in advance. We have changed that,” says Infosys board member and director, HR, TV Mohandas Pai, told ET .

    Infosys have a target of hiring 25,000 employees this fiscal and based on this; it will be hiring another 9,000 employees till March, 2009. For the December quarter, Infosys and its subsidiaries added 5,597 employees on a gross basis, much lower than the previous quarter’s 10,117. Net employee addition stood at 2,772 for the quarter.

    One of the reasons for scrapping advance hiring is that the company is moving towards a leaner bench. According to Mr Pai, Infosys’ current bench strength is at 20% of total employees, which is likely to come down to 10% and eventually stabilise between 10 and 15% in the coming fiscal. “Attrition is down because growth has come down and hence the need for bench is less. We are in the middle of an adjustment towards a leaner bench,” he pointed out.

    The IT major has also tightened performance management norms and has placed around 5% of its global workforce (roughly 5,000 out of a total staff strength of 100,000-plus ) under the scanner. Senior managers have been asked to give the lowest performance rating to the ‘underperforming’ 5% as a part of the company’s consolidated relative ranking. Though rock-bottom rankings have been handed out earlier, this is the first time that Infosys has made it mandatory.

    Pai said Infosys has been trying to make the organisational structure leaner and efficient resulting in some 100 positions being knocked off. “They are not being redeployed because these positions do not exist any longer. But it is a modest figure when compared to the overall numbers,” he said.

    Meanwhile, the company has reduced the variable part of the board members’ compensation by 30% in the second quarter of the current fiscal and by an additional 20% in the third quarter.
    CommentQuote
  • From Economic times:
    With investors shying away from real estate sector, Property Investment Advisors ASK expects there could be an up to 30 per cent price
    correction across most realty markets in the country.
    We believe that there is scope for another 25-30 per cent correction in prices in most (property) markets of the country," ASK Property Investment Advisors said in a report based on a review of the sector.
    Stating that demand was overwhelmingly gravitating towards "affordable housing", ASK said that end-users and investors were shying away from real estate resulting in a demand-supply mismatch with the creation of substantial inventory of premium/affordable properties.

    Demand would be increasingly price and product sensitive with completed properties commanding a 15-30 per cent premium over under construction properties due to a perceived increase in project execution task, it said.
    "The top seven cities continue to have considerable latent demand for housing and at the right price, buyers are rushing to the market," it said, adding demand in the seven top cities had been impacted more than tier-III and emerging cities.
    CommentQuote
  • I had also suggested this (i will retrieve the post it was against comparing japan with india)

    This last Tuesday the Wall Street Journal published an op-ed by my friend Gary Shilling and Richard LeFrak. They offer a simple solution for the housing crisis: give foreigners who will come to the US and buy a home resident status (green cards). This is a very important proposal and one that deserves national attention and action.
    CommentQuote
  • Originally Posted by abk
    I had also suggested this (i will retrieve the post it was against comparing japan with india)

    This last Tuesday the Wall Street Journal published an op-ed by my friend Gary Shilling and Richard LeFrak. They offer a simple solution for the housing crisis: give foreigners who will come to the US and buy a home resident status (green cards). This is a very important proposal and one that deserves national attention and action.


    check this out.
    if the epicentre of the crisis,the US the peak to trough is estimated <37 % then my prediction of chennai proper to correct by 20 % (max) is not overtly optimistic or 'denial mode'. and this prediction is if nothing is done---no stimulus.

    ]http://www.marketoracle.co.uk/Article9582.html
    U.S. House Prices Could Drop Another 20%, Housing Market Crisis Solutions
    Housing-Market / US Housing
    Mar 22, 2009 - 06:58 AM

    By: John_Mauldin
    Housing Could Drop Another 20% in Pricing

    Let's review the situation as it will be if we do nothing. Shilling shows that we built 6.7 million more homes in this country between 1996-2005 than the normal trend would have projected, partially because we underbuilt the decade before that. New housing starts average about 1.5 million in normal times but have fallen to 500,000 recently, and could fall further as unemployment rises and demand declines. Even so, Shilling estimates that we still have about 2.4 million excess homes.

    Excess supply of anything means lower and continuously falling prices, and that has certainly been the case in housing. Here is what Shilling writes:

    "We believe that if nothing is done to eliminate surplus housing, prices will fall another 20% between now and the end of 2010 for a total peak-to-trough decline of 37% (Chart 1 below). The resulting further negative effects on the economy will be devastating. At that point, almost 25 million homeowners, or almost half the 51 million total with mortgages, will be underwater... That's also a third of the 75 million total homeowners, with the remaining 24 million owning their houses free and clear. It would take a little over $1 trillion to reduce their mortgages to the value of their houses, compared to $449 billion for the almost 14 million currently underwater."

    This is not inconsistent with similar projections by other acknowledged experts and independent analysts like John Burns and Professor Robert Shiller of Yale. If (Chart 1 below). The resulting further negative effects on the economy will be devastating. At that point, almost 25 million homeowners, or almost half the 51 million total with mortgages, will be underwater... That's also a third of the 75 million total homeowners, with the remaining 24 million owning their houses free and clear. It would take a little over $1 trillion to reduce their mortgages to the value of their houses, compared to $449 billion for the almost 14 million currently underwater."

    This is not inconsistent with similar projections by other acknowledged experts and independent analysts like John Burns and Professor Robert Shiller of Yale. If
    CommentQuote
  • Originally Posted by abk
    check this out.
    if the epicentre of the crisis,the US the peak to trough is estimated <37 % then my prediction of chennai proper to correct by 20 % (max) is not overtly optimistic or 'denial mode'. and this prediction is if nothing is done---no stimulus.

    ]http://www.marketoracle.co.uk/Article9582.html
    U.S. House Prices Could Drop Another 20%, Housing Market Crisis Solutions
    Housing-Market / US Housing
    Mar 22, 2009 - 06:58 AM

    By: John_Mauldin
    Housing Could Drop Another 20% in Pricing

    Let's review the situation as it will be if we do nothing. Shilling shows that we built 6.7 million more homes in this country between 1996-2005 than the normal trend would have projected, partially because we underbuilt the decade before that. New housing starts average about 1.5 million in normal times but have fallen to 500,000 recently, and could fall further as unemployment rises and demand declines. Even so, Shilling estimates that we still have about 2.4 million excess homes.

    Excess supply of anything means lower and continuously falling prices, and that has certainly been the case in housing. Here is what Shilling writes:

    "We believe that if nothing is done to eliminate surplus housing, prices will fall another 20% between now and the end of 2010 for a total peak-to-trough decline of 37% (Chart 1 below). The resulting further negative effects on the economy will be devastating. At that point, almost 25 million homeowners, or almost half the 51 million total with mortgages, will be underwater... That's also a third of the 75 million total homeowners, with the remaining 24 million owning their houses free and clear. It would take a little over $1 trillion to reduce their mortgages to the value of their houses, compared to $449 billion for the almost 14 million currently underwater."

    This is not inconsistent with similar projections by other acknowledged experts and independent analysts like John Burns and Professor Robert Shiller of Yale. If

    Abk,
    In US RE Price increased only by around 60% between 2002 and 2007 and the fall expected as per you is 37%.But in India RE price increased between 300% and 400% between 2002 and 2007.So the fall will also be much steeper may be around 70-80% from peak of 2007/2008.

    Abk,
    In US RE Price increased only by around 60% between 2002 and 2007 and the fall expected as per you is 37%.But in India RE price increased between 300% and 400% between 2002 and 2007.So the fall will also be much steeper may be around 70-80% from peak of 2007/2008.

    Abk,
    In US RE Price increased only by around 60% between 2002 and 2007 and the fall expected as per you is 37%.But in India RE price increased between 300% and 400% between 2002 and 2007.So the fall will also be much steeper may be around 70-80% from peak of 2007/2008.

    Abk,
    In US RE Price increased only by around 60% between 2002 and 2007 and the fall expected as per you is 37%.But in India RE price increased between 300% and 400% between 2002 and 2007.So the fall will also be much steeper may be around 70-80% from peak of 2007/2008.
    CommentQuote
  • Not necessarily the reason why!

    Originally Posted by BigBear
    Abk,
    In US RE Price increased only by around 60% between 2002 and 2007 and the fall expected as per you is 37%.But in India RE price increased between 300% and 400% between 2002 and 2007.So the fall will also be much steeper may be around 70-80% from peak of 2007/2008.



    Correlation must not be confused with causation! :D

    In simple terms it means that, "because US rose 60% and is now falling 37%, therefore, India which went up 300% MUST fall 70%.

    The US market has a long-term annual increase in home prices of 1% (yes, 1%) over the last 100 years. The Indian market has one of around 12% to 15%. Therefore the dynamics (including other factors like stable population in US implying lower demand, etc, etc) means that the reasons and extent of rise as well as fall may be quite different.

    But I agree with you that the 70% fall is coming in many areas of this country. Reasons may be different from the US.

    cheers
    CommentQuote
  • Dear friend,

    Though I do not believe that the RE in India will have anything like 70% fall, it will really be good it it happens, to those who are not owning any house/flat and also those wanting to go for their second or third investments in RE to reap rich benefits in the coming years.

    ks2071746
    CommentQuote
  • Originally Posted by wiseman
    Correlation must not be confused with causation! :D

    In simple terms it means that, "because US rose 60% and is now falling 37%, therefore, India which went up 300% MUST fall 70%.

    The US market has a long-term annual increase in home prices of 1% (yes, 1%) over the last 100 years. The Indian market has one of around 12% to 15%. Therefore the dynamics (including other factors like stable population in US implying lower demand, etc, etc) means that the reasons and extent of rise as well as fall may be quite different.

    But I agree with you that the 70% fall is coming in many areas of this country. Reasons may be different from the US.

    cheers

    I also understand India's rise or fall percent cannot be directly corelated to to US.But some people are assuming that since US had fallen only by around 25% India should fall less than this.
    This cannot be true since inflation in low in US as compared to India and
    also India had 300% jump as compared to US 60%.So as per economics whatever goes up fast will also come down equally fast.
    CommentQuote
  • Dear friend,

    As long as there is huge and continuous demand in India in the housing sector for living of so many millions of people still not having any house or flat of their own, the fall may not be as steep as it would be in US. After all, these are real demands which increase day by day, due to increasing population as also the uptrend in the per capita income of the people.

    ks2071746
    CommentQuote
  • Originally Posted by ks2071746
    Dear friend,

    As long as there is huge and continuous demand in India in the housing sector for living of so many millions of people still not having any house or flat of their own, the fall may not be as steep as it would be in US. After all, these are real demands which increase day by day, due to increasing population as also the uptrend in the per capita income of the people.

    ks2071746


    exactly-'real demand'.
    the indian karma mentality which lists (in order of import)
    ROTI,KAPADA AUR MAKAAN.the inherent cultural diff which lays stress on a
    life long commitment to family(same lol) and the social pressure to have a 'own house' and the apparent sense of security which the asset provides is deeply rooted in the indian psyche.
    CommentQuote
  • Originally Posted by BigBear
    I also understand India's rise or fall percent cannot be directly corelated to to US.But some people are assuming that since US had fallen only by around 25% India should fall less than this.
    This cannot be true since inflation in low in US as compared to India and
    also India had 300% jump as compared to US 60%.So as per economics whatever goes up fast will also come down equally fast.


    Dear friends,

    When we are talking about 70-80% crash we are talking about rolling back the 300%-400% hike that happened during the boom.

    If a land sold at 1000/sqft in the year 2004 is being sold at 4000/sqft in 2009 thats a whopping 400% rise in 5 years.

    i.e. 1 ground land sold at 24Lakhs us being sold at 96 Lakhs today.
    If we see a correction of 75% over 96 Lakhs we are back to 2004 price of 24 Lakhs.

    It took 5 years to reach this price at 32% CAGR

    32% CAGR is not sustainable and seems inflated.In india its widely believed that RE gives only 10-15% sustainable CAGR for short term and nearly 20-25% for long term.

    Taking 15% CAGR, In 5 years the value of land should be only

    2400000 * (1 + 15/100) ^ 5 = 48.25 Lakhs

    The difference between current price and actual price is 47.75 Lakhs.

    i.e. we can fairly expect minimum correction of 50%.

    Depending on the location,proximity to facilities, infrastructure and demand the number can be +/- 10-15%

    75% correction is the best a buyer can hope.And according to me it can happen only to speculative locations.
    CommentQuote
  • Originally Posted by nabishek
    Dear friends,

    When we are talking about 70-80% crash we are talking about rolling back the 300%-400% hike that happened during the boom.

    If a land sold at 1000/sqft in the year 2004 is being sold at 4000/sqft in 2009 thats a whopping 400% rise in 5 years.

    i.e. 1 ground land sold at 24Lakhs us being sold at 96 Lakhs today.
    If we see a correction of 75% over 96 Lakhs we are back to 2004 price of 24 Lakhs.

    It took 5 years to reach this price at 32% CAGR

    32% CAGR is not sustainable and seems inflated.In india its widely believed that RE gives only 10-15% sustainable CAGR for short term and nearly 20-25% for long term.

    Taking 15% CAGR, In 5 years the value of land should be only

    2400000 * (1 + 15/100) ^ 5 = 48.25 Lakhs

    The difference between current price and actual price is 47.75 Lakhs.

    i.e. we can fairly expect minimum correction of 50%.

    Depending on the location,proximity to facilities, infrastructure and demand the number can be +/- 10-15%

    75% correction is the best a buyer can hope.And according to me it can happen only to speculative locations.


    You are right Abishek,

    Any price escalation in line with the growth rate of the country (+ or - 2-3 percent) is sustainable and none will complain and people can still afford.

    Factoring the growth rate , Yes 40-50 percent correction looks reasonable on livable areas and more can be expected in far off places.

    Cheers.
    CommentQuote
  • Dear friend,

    I feel, a reduction to the tune of 10 to 20% in good localities and to the tune of 20 to 35% in out of city locations can be expected within a period of about 12 months. Of course, the progress of the projects may not be very fast and there can be delays. A project committed for completion in 12-18 months time frame may be delayed by atleast 6 months and such of those projects with higher reductions may even et delayed to the tune of 12 months or more. One should authorise paymentas based on actual progress only. It is always advisable to look for projects already progressing and completion in the next maximum 6 months like period so that the preEMI burden is reduced and either self occupation or renting out can be quick.

    With regard to toilet, my personal experience has been that it is better to go in for a loft tank of say 200 to 300 litres capacity during the construction stage itself in atleast one toilet and if feasible & possible, a seperate one for the kitchen or a combined one for the toilet and kitchen.
    A tank of good make costs about Rs. 1600 to Rs. 2000 with fittings. The importane of this provision will be best known only when one really experiences due to pump problem, power cut or water shortage due to variety of reasons.

    ks2071746
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